Things are looking up at Transnet, but…

Things are looking up at Transnet thanks to the concerted effort of business, government and Transnet itself, although not all the problems have been solved as many companies still struggle to gain access to sufficient capacity to move goods down rails or out of ports.

Busi Mavuso, CEO of Business Leadership South Africa (BLSA), says in her latest newsletter there was a lot of positive news about logistics this month. Nine new members were appointed to the Transnet board, including a new chairperson, Andile Sangqu, former head of Anglo American South Africa.

“This is a strong raft of experienced leaders with excellent business, logistics and public sector experience who can support CEO Portia Derby and CFO Nonkululeko Dlamini. Then, Transnet took a significant step forward to the concession of a large part of the Durban port, which handles 72% of Durban’s through-put, by announcing International Container Terminal Services, a Philippino operator that manages 34 terminals in 20 countries, as preferred bidder for a joint venture to upgrade Container Terminal Pier 2.”

However, there is still some way to go until agreements are completed and investment can begin, but there is a tangible sense of progress.

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Infrastructure and port in Northern Cape

Mavuso also points out that Transnet took a step forward in the development of infrastructure in Northern Cape, shortlisting three respondents to submit proposals for the design, funding and construction of a planned port and rail infrastructure project linked to Boegoebaai.

“This could open up significant opportunity for the mining sector and potential green hydrogen projects in the province. Again, there is a long way to go until soil is turned, but progress is happening.”

Although this is good news, Mavuso says all the problems have not been solved – far from it.

“Many companies are still struggling to gain access to sufficient capacity to move their output down rails or out of ports. As a result, they cannot expand, invest, or employ more people. This problem is multi-faceted, ranging from criminal gangs vandalising rail and equipment to a shortage of spare parts.”

Mavuso says this is still a prime motivator for gloominess that emerges in the results of companies like Kumba Iron Ore that has to reduce production because it cannot get enough of its output onto rail to reach the ports.

ALSO READ: Gordhan appoints former top Anglo American exec Andile Sangqu as new Transnet chair

National Logistics Crisis Committee

A National Logistics Crisis Committee (NLCC) now drives the efforts to fix the wider logistics system with government and business working together to deal with the challenges. Several top CEOs with strong logistics and transport experience will work alongside top government leaders and Transnet senior executives.

Business agreed in principle to back the NLCC with funding, which will rely on the presidency’s effective Operation Vulindlela as secretariat. Mavuso warns there is a long list of challenges for the NLCC to tackle, from rail capacity to congestion on the roads and land border crossing points.

Modelling by academic Jan Havenga suggests that South Africa’s gross domestic product (GDP) was reduced by 6.68% last year due to the logistics crisis. Coupled with our electricity crisis, much economic potential is being squandered, Mavuso says.

The NLCC model borrows from the National Electricity Crisis Committee (Necom) set up last year that was effective in mobilising resources and driving a multi-faceted plan to deal with the crisis. Necom and the NLCC draw business and government together in partnership to unlock blockages and fix policies to overcome the respective crises.

“I hope the NLCC will in time make the kind of progress Necom has to rapidly shift policy blockages, stimulate private sector responses and push through much needed restructuring.”

ALSO READ: Transnet slow to achieve third-party access as only one slot sold

Positive momentum dealing with logistics crisis

She says good progress is now made to deal with the electricity crisis, including massive amounts of new investment by the private sector to expand generating capacity.

“Recent progress by Transnet and the establishment of the NLCC indicate to me early positive momentum on dealing with the logistics crisis.”

Although it lags the effort on electricity, the direction is the right one and with positive commitment by Transnet, government and business, it could achieve similar things, Mavuso says.

“Business is a critical part of these efforts and we will continue to rally the expertise and other resources needed to ensure their success. We now appear to be on the right track and I look forward to working with partners to ensure we stay on it and accelerate progress.”